Market Shakeout

Given the market need for MSPs, the future will undoubtedly see a lot more vendors, venture capital, and functionality. In fact, some analysts predict an explosion of new MSP entrants, followed by a shakeout and a lowering of prices as vendors commoditize — thus providing capabilities for dollars.

Because the MSP is an unproven model, some vendors will go under. They will find the cost of tool ownership and the number of failures high. In addition, customers can easily change MSP allegiance, because there is a low switching cost — especially when compared with traditional software and services.

Furthermore, when customers pay a service fee, they simply get a service level agreement (SLA) as a commitment. For example, while an MSP might specify 100 percent availability, speed is not mentioned, so the vendor is only policing SLAs.

Some MSPs offer free service during the time of an outage. However, an ISP can lose $100,000 an hour every eight hours it is down, while a power company could lose $1.5 million. In such cases, the free $1000 service provides no equity.

This will have to change so that MSPs add more management capabilities and monitoring tools and shore up their service levels, backing it up by a rock-solid environment. Because this will cost more to do, it will kill some vendors. However, a number of large ones will remain.

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